Understanding Peak-Valley Price Differences in the Energy Sector
The Peak-Valley Price Difference is a vital topic in the energy sector, particularly as new energy projects enter the market and the proportion of coal power capacity charges increases. Starting in 2026, this proportion is expected to rise to at least 50%. Consequently, the average spot market electricity price is projected to gradually decrease, leading to a widening peak-valley price difference. The reduction in settlement prices for existing solar projects is anticipated to far exceed that of existing wind farms.
When accepting market prices, the electricity costs for renewable energy facilities will encompass both the mechanism price difference and the market transaction electricity prices. Initially, no other forms of price difference settlement will be initiated.
Energy Storage Developments
Recent advancements in energy storage have enabled the entire value chain to upgrade. Current models suggest that energy storage can also create value by participating in peak shaving and frequency regulation, thereby gaining compensation for auxiliary services and engaging in market activities to take advantage of peak-valley price differences. For instance, in Shanxi, the frequency compensation standard has reached 6-12 yuan/mw·time, while in Guangdong, the peak-valley price difference has exceeded 0.8 yuan/kWh, significantly enhancing the economic viability of energy storage systems.
Market Mechanisms and Innovations
By 2030, energy storage is expected to emerge as a “fourth type of power source,” influencing electricity pricing through real-time quotes. Regions such as Shaoxing in Zhejiang and Hotan in Xinjiang have also validated the commercial feasibility of independent storage through peak-valley price arbitrage models.
Recent operational data from the Yancheng Sheyang energy storage station indicates that it is the largest energy storage facility in Jiangsu Province, boasting a capacity of 250 MW/500 MWh. Efforts are being made to encourage virtual power plants to efficiently participate in the electricity market, thereby expanding peak-valley price differences and forming demand response pricing. This involves exploring capacity pricing mechanisms based on the scaling of virtual plant responses, which take into account system characteristics like power source structure and load curve patterns.
Challenges and Recommendations
Despite significant advancements, the revenue mechanism for energy storage peak regulation remains underdeveloped. Although new energy storage installations have surpassed 70 million kilowatts, the potential for peak-valley price differences is still limited, and the economic benefits have yet to be fully realized. Recommendations include improving time-of-use pricing mechanisms to expand peak-valley price differences to over 4:1, thereby activating flexible resources such as energy storage and virtual power plants.
Moreover, the gradual removal of guaranteed purchases for new energy sources is urged to foster competition among existing projects in the market. The emergence of negative electricity prices can also be attributed to the rising penetration of renewables and the mechanisms of the electricity spot market, illustrating a complex landscape where both negative and high electricity prices coexist.
Future Outlook
As the share of wind and solar installations in the energy mix surpasses 40%, and with the continuous widening of load peak-valley differences, a dynamic pricing mechanism that allows for both increases and decreases in market prices is essential. This approach embodies the vitality that the release of market mechanisms can generate.
In 2024, various regions will implement seasonal pricing adjustments, with the peak-valley price differences expected to exceed 0.6 yuan/kWh in over 20 provinces by March 2025. Experts suggest that enhancing the market-driven price mechanism is crucial for creating reasonable profit margins for flexible adjustment resources like energy storage.
In summary, the ongoing reforms and developments within the energy sector, particularly regarding peak-valley price differences, indicate a transformative phase that seeks to optimize electricity pricing mechanisms while fostering innovation in energy storage and market participation.
